Ailing Baytree Bank sells Lake Bluff branch to Wintrust

The sale of the branch, which is expected to close in the first quarter, will shift about $23 million in deposits and an unspecified amount of loans to Rosemont-based Wintrust, which already dominates banking in Lake Bluff with $125 million, or 67 percent, of the deposits there at its Lake Forest Bank & Trust Co.

For Baytree, whose $137 million in assets make it less than a hundredth the size of $17.6 billion-asset Wintrust, the deal is part of a bid to rescue the bank for the second time in nearly four years. Baytree was on the brink of failure in early 2010 when an investor group led by former American Chartered Bank lender Michael Flynn pumped in $14 million in new equity.

Despite that infusion, plus another $2.7 million in equity raised later, Baytree is in trouble. It posted a $1.5 million loss in the first nine months of 2013. Its $11 million in troubled assets exceeds its total capital of $8.7 million, a sign that it needs to shrink or raise equity in order to keep capital levels high enough to keep from eventually failing.

Mr. Flynn stepped down as Baytree CEO several months ago.

“The (sale to Wintrust) is a positive step forward for Baytree,” the bank's Chief Operating Officer Jim McGrath said in an email. “This transaction will have no effect on our Lake Forest branch, and we look forward to continuing to serve the banking needs of our community.”

Wintrust CEO Edward Wehmer said he intends early next year to close his bank's current Lake Bluff branch and operate out of the location now owned by Baytree.

Neither executive would comment on the terms of the deal.

But shrinking is one way a bank with low capital levels can improve its condition — by reducing the assets that capital must support. As of Sept. 30, Baytree's Tier 1 capital ratio was at 4.4 percent and falling. Less than 4 percent renders a bank undercapitalized in federal regulators' eyes.

Baytree was founded in 2000 by Howard Adams, who had launched Wintrust along with Mr. Wehmer roughly a decade before that. But the two had a falling out, and Mr. Adams left to form Baytree. Mr. Adams died in 2009, as Baytree's problems were becoming apparent. The Adams family no longer holds an interest in Baytree.